Car makers 'in full panic' over rare-earths shortage amid China's export controls

Irish Examiner

2 days ago

Frank Eckard, chief executive of a German magnet maker, has been fielding a flood of calls in recent weeks. Exasperated car makers and parts suppliers have been desperate to find alternative sources of magnets, which are in short supply due to Chinese export curbs.
Some told Eckard their factories could be idled by mid-July without backup magnet supplies.
"The whole car industry is in full panic," said Eckard, chief executive of Magnosphere, based in Troisdorf, Germany. "They are willing to pay any price."
Car executives have once again been driven into their war rooms, concerned China's tight export controls on rare-earth magnets — crucially needed to make cars — could cripple production.
US president Donald Trump said on Friday that Chinese president Xi Jinping agreed to let rare earths minerals and magnets flow to the United States. A US trade team was scheduled to meet Chinese counterparts for talks in London on Monday.
The industry worries the rare-earths situation could cascade into the third massive supply chain shock in five years. A semiconductor shortage wiped away millions of cars from car makers' production plans, from roughly 2021 to 2023. Before that, the coronavirus pandemic in 2020 shut factories for weeks.
Those crises prompted the industry to fortify supply chain strategies. Executives have prioritized backup supplies for key components and reexamined the use of just-in-time inventories, which save money but can leave them without stockpiles when a crisis unfurls.
This time, as the rare-earths bottleneck tightens, the industry has few good options, given the extent to which China dominates the market. The fate of car makers' assembly lines has been left to a small team of Chinese bureaucrats as it reviews hundreds of applications for export permits.
Several European auto-supplier plants have already shut down, with more outages coming, said the region's auto supplier association, Clepa.
"Sooner or later, this will confront everyone," said Clepa secretary-general Benjamin Krieger.
Cars today use rare-earths-based motors in dozens of components — side mirrors, stereo speakers, oil pumps, windshield wipers, and sensors for fuel leakage and braking sensors.
China controls up to 70% of global rare-earths mining, 85% of refining capacity and about 90% of rare-earths metal alloy and magnet production, consultancy AlixPartners said.
The average electric vehicle uses about 0.5kg of rare earths elements, and a fossil-fuel car uses just half that, according to the International Energy Agency.
China has clamped down before, including in a 2010 dispute with Japan, during which it curbed rare-earths exports. Japan had to find alternative suppliers, and by 2018, China accounted for only 58% of its rare earth imports.
General Motors and BMW and major suppliers such as ZF and BorgWarner are working on motors with low-to-zero rare-earth content, but few have managed to scale production enough to cut costs.
The EU has launched initiatives including the Critical Raw Materials Act to boost European rare-earth sources. But it has not moved fast enough, said Noah Barkin, a senior adviser at Rhodium Group, a China-focused US think tank.
Even players that have developed marketable products struggle to compete with Chinese producers on price.
David Bender, co-head of German metal specialist Heraeus' magnet recycling business, said it was only operating at 1% capacity and would have to close next year if sales do not increase.